When tracking ecommerce business performance, marketers often focus on the general results of their activities. Traffic growth, sales, and shoppers ready to recommend the store. Segmenting customers and products, sales and the channels they come from, are essential if you want to see where the marketing funnel flaws are and what you should optimize first.
Let’s look at the top 7 ecommerce metrics marketers often misinterpret and how to correct these mistakes.
Before you dig in, here’s an article on how to use email marketing for ecommerce 😉
Traffic and conversions
If you’re happy about reaching milestones in your traffic, but at the same time you’re asking yourself “where are the sales?”, you probably need to look at the situation from two different angles:
Although the numbers sound promising, the thing you may be missing is the quality of the traffic.
If sales are low, you’re not driving the right traffic to your site, your customers don’t have purchasing power or are looking for something else.
Lousy SEO or bad ad copy may lead to traffic converting at lower rates than expected. Make sure that all representations of your business and products are accurate and fully align with the brand image:
- Social media and Google ads describe the products correctly
- Keywords used in your copy are connected to your products
- You use the right platform to promote your product
- Product descriptions are correct
Poorly designed website
The reasons why a website is not performing well enough to convert may be different. From security issues to poor product descriptions, to slow loading.
This metric lets you understand how many visitors from your website become your customers. Conversion ratio depends on your industry, country, and the devices your visitors are using. How do you know if a conversion rate is good enough?
Conversion rates range from 4% to over 14%. You may be mistaken about your conversion ratio if you don’t keep the following in mind:
#1 Rates in your industry
Legal services, along with publishing and sport & activities sectors, enjoy the highest conversion rates starting at 11.40%. Retail, financial services, and automotive industries usually don’t get more than 6% conversion on landing pages.
See more industries and their average conversion rates in our Email Marketing Benchmarks.
#2 Segmenting by device
According to SmartInsights, conversion rates in the US are much lower than in the UK, and conversions via smartphone happen twice more often in the UK than in the US.
The global trend shows that shoppers usually buy much more often on desktop (3.63%) and tablets (3.14%) than smartphones (1.25%).
If your website is not optimized for mobile devices, your conversion rates will be much lower than expected. When visitors don’t see the CTA button or can’t easily navigate the search listing, you’re losing leads.
Take a look at this metric in the Google Analytics Audience Report to segment your visitors depending on the device they use:
# 3 Segmenting by product
Compare the conversion rates for different products.
Are your customers more willing to buy cheaper items than premium ones? This data may help you understand what parts of your website and ecommerce marketing strategy need to be optimized.
If your customers are buying mostly cheap items, consider how they really see your store.
LTV – customer lifetime value
This metric indicates how much money the average customer brings you, from the first purchase to the moment they stop buying from you.
LTV and CAC (customer acquisition cost) are two of the most important metrics. They allow you to compare the cost of acquiring the customer and the value they provide you with.
Let’s say you’re selling lenses for people with impaired vision. You’ve acquired one customer with your AdWords campaign and spent $20 on the acquisition. If on top of that, it costs you $5 to get the lenses from the manufacturer and you sold them to your customer for a total of $25, you might think that you’ll soon be out of cash and your business will go bust.
But that’s not entirely true. Your average customer will buy lenses from you every month for six years. Even if your profit on the first transaction is $0, but you’ll keep selling the lenses for $25 a pair, you’ll get a recurring $20 profit from the same customer “for free”.
Lack of segmentation
Segment customers into different categories based on their main characteristics:
- Gender and age (maybe females in their 40s spend more on your products than young males?)
- Location (people from different cultures may have different opinions on the same pages)
- Types of the products they are buying
- Channels they come from
Calculating profit the wrong way
You’re using your revenue numbers instead of calculating your profit. Don’t forget to decrease the revenue by the costs you incur.
When you’re just starting an ecommerce business, you won’t know your LTV. Just wait until you have a decent number of returning customers and use accurate data.
CAC – customer acquisition cost
This metric shows how much money you spend on the acquisition of a single customer.
CAC is highly dependent on the product you sell, price, location, season, and type of the customer.
Not including non-direct expenses
Include non-direct expenses in your CAC for accurate results.
Your cost per acquisition should include all your traffic acquisition expenses:
CAC = (marketing + sales expenses) / number of new customers acquired, including
- salaries of marketers, developers, sales team, and designers working on the campaigns
- ad spend
- contractor fees, if applicable.
Not segmenting your cost depending on location
Some countries are much more expensive than others, and the volume of market ready to purchase and the average order value also differ.
Not segmenting customers depending on order value
Well, you can’t mix the data of customer A who buys ten pens, bringing you $20 profit, with customer B who buys a notebook with your profit margin of $50.
You can probably spend another $10 on the acquisition of the latter and recalculate how much you can spend on acquiring the first one.
CAC is highly related to the LTV, instead of the first order value. The golden rule for CAC is:
CAC: LTV = 1:3
It means you can spend up to three times less on marketing than the lifetime value of the customer.
Revenue by traffic source
It might seem obvious your spend on different advertising platforms. But this can be tricky if you don’t consider some details.
Imagine traffic from one source is less expensive than traffic from a different one. Should you navigate all the expenses to the better performing platform?
First, check the quality of the traffic. If you’re optimizing your campaigns for website visits, you may not be able to directly compare the traffic from a platform to how many customers came from it.
Some traffic sources can bring you customers who won’t buy straight away, but will later on. If you want to dig deeper, use cohort analysis to track customer performance in time.
Customer retention rate
Ecommerce stores often overlook retention, which is a mistake. Customers who come back to buy from you, promote your products, and stay with you no matter what, are gold for your ecommerce store.
Some customers purchase only discounted items, making retention rates much higher if you’re offering regular sales. But how does this affect the average order rate and profits?
Chasing a higher CRR, you should focus on creating more value for customers instead of attracting them with cheaper products.
How to track different types of retention rate?
Segment retention rates depending on the average order value. You can do that by creating groups of customers who buy in the low, average, and high pricing segments.
Low CRR doesn’t have to mean your customers are dissatisfied, or your competitors outperform you. Some products are simply bought just once. If your shop is not offering multiple products valuable to a single customer or products people buy regularly, you should focus on metrics other than CRR.
Net promoter score
How likely are your customers to recommend your store? An answer from an NPS survey is a number on a 1 to 10 scoring scale.
The tricky thing is that you may get the wrong numbers if you don’t follow a few simple rules.
Sending the survey at the wrong time
This mistake happens when a customer has bought your product online but didn’t receive it yet or received it a long time ago and forgot about it.
It’s also important to send another survey when your customer returned the item and when they wanted to get a refund. Store data from these customers separately, if possible.
The best time to send a survey to your shoppers is when they’ve just received their order. This way you allow them to share their feedback both on the logistics and the customer service.
Asking the wrong questions
Do you use the classic “How likely are you to recommend our company/ product/ service to a friend or colleague?” What questions do you include after this, if any?
Ask questions that you want the answers to. And phrase them in a way that most people will understand similarly.
Not tracking it in time
Use the answers not only as numbers but also as a source of quality feedback. It’s much more important to know what exactly drives your customers mad about your products and how this changes over time.
Tracking marketing results and sales activities right is crucial for building a viable ecommerce marketing and sales system. Metrics often don’t speak for themselves. So, adapt them and interpret them with my tips in mind for a better understanding of all the opportunities for optimization and improvement.